Credit Card Companies Reducing Some Card Limits

You may start feeling the effects of the credit crisis, if you haven’t already. Many families are already relying on credit cards to pay their basic expenses, such as gas, groceries, bills. Now some banks and credit card companies are cutting back on the credit and loans they’re offering. You may soon find you have less credit available or can’t get a loan you need.

Counting on your credit card to make a major purchase? Check your credit limit first. Visa, Mastercard, and American Express are all lowering credit limits on some card holders to reduce the risk of customers not making payments. The New York TImes reports limit cuts are being placed on customers with heavy debt, who live in areas with high foreclosure rates, or work in troubled industries.

Certified Financial Planner Rick Van Der Noord says that could, and should, force families to change the way they spend. Said Van Der Noord, “If you have to use credit for your living expenses, it wasn’t smart and it’s not smart, but it might not even be an option at this point.”

But lowering your limit can reduce your credit score. It forces your debt to credit ratio to go down. That could mean paying higher interest rates on your other credit cards or a car or home loan. Not to mention if you overspend your new credit limit, you’ll be hit with fees.

But Stuart says students won’t see much if any change in Federal or State school loans. Said Stuart, “Most of our loans go through the South Carolina Student Loan Authority and their funding is fine.”

Stuart says Federal loans are still available but schools may have to find different banks to back those that are not backed by the government.

If you’re having trouble getting a student loan, Stuart says go back to your financial aid office. Many schools are now offering loans they fund themselves. You may also try using a co-signer for a private loan.

How can you fix your credit score if your credit limit has been lowered? Try asking the lender to raise it again. If you have a good payment history, point that out. Ask other cards for an increase, open a new account, or pay down the balance.

News Source : http://www.wspa.com/